Amazon has always been a marketplace, first and foremost. Once upon a time, it just sold books — plain, old books — but now it’s the "Everything Store."
And looking at today’s introduction of the long-rumored Fire Phone, one feature demonstrates just how important that Everything Store is to Jeff Bezos’ multibillion-dollar empire: Firefly, an object-recognition technology that lets you snap a picture of virtually anything (or listen in on a song or television show) and buy it from Amazon immediately. The company says it can recognize 100 million different objects. Its goal is no less audacious than to simply turn your entire life, online or out in the real world, into a never-ending stream of opportunities to sell you something.
Making your life a never-ending opportunity to shop AmazonFor most of us, "Firefly moments" happen every single day. My wife and I were shopping for a new sunhat for our toddler last weekend; we went to the local kid’s clothing store and picked one out. They didn’t have it in quite the right size, but we bought the best option. When we got back home, my wife started browsing Amazon, and found the exact same item, in the right size — but for 25 percent less including free two-day shipping. We could have used our phones to look up that hat while we were in the store to see if it was available online for less, granted, but it would’ve involved fiddling with our phones. Firefly, meanwhile, is utterly frictionless. It’s part and parcel of the Fire Phone. It even has its own physical button, shared with the camera.
The behavior of comparing online and offline prices is called "showrooming," and it’s at the core of Amazon’s decision to create a smartphone. It's already happening a lot. During the 2013 holiday season, US retailers saw half the foot traffic they did three years ago. With the Fire Phone, my first impulse would have been to use a single press of a button to open Firefly, snap a picture of that hat, and see if the item (or another one like it) was available on Amazon for less. The local store we were standing in would’ve been totally out of luck.
Bezos demonstrated Firefly at today’s event, snapping a picture of a book, a DVD, a jar of Nutella, kosher salt, and dishwasher detergent. The sky’s the limit — in fact, if Amazon sold the sky, you’d be able to use Firefly to buy it. "If it’s successful, it’ll give a huge boost to showrooming," says Gartner analyst Tuong H. Nguyen. "Other phones are physically cable of doing this and wrapping an app around it. The main difference is Amazon has the e-store to tie it together."
"If it’s successful, it’ll give a huge boost to showrooming."Not everyone thinks ecommerce is enough of a differentiator to make the Fire Phone a success, or that Amazon is doing its shareholders a favor by diving deeper into the hyper-competitive world of consumer hardware. "I'm not convinced that an Amazon phone is a home run waiting to happen," notes Sucharita Mulpuru, a Forrester analyst. "The truth is there's very little friction to buying on Amazon even on other mobile devices now. But any observer should be looking for two things: what's compelling for consumers and how is Amazon planning to not just lose a lot of money on it? Their pockets are not as deep as Google's or Apple's and investors need to recognize that reality."
Indeed, the Fire Phone — with its insane four-camera "Dynamic Perspective" 3D head-tracking system that Bezos says took four years to perfect — can’t be cheap to make. Still, he may have the data he needs to back up a strategy of selling mobile hardware near cost in order to drive more sales to his Everything Store. "Amazon cares about phones only as a means to a digital relationship end, a way to make sure customers think of Amazon not just a few times a month, or even a few times a week, but dozens of times a day, creating the opportunity for Amazon to convert as many of those interactions into purchases as possible," notes analyst James McQuivey. "Amazon surely has the evidence that getting a Kindle Fire tablet into consumer hands lifts long-term purchases and probably drives up the number of categories those consumers buy from. It won't need very many Amazon Phone customers before it can confirm whether the same will be true for phone owners."
"It's cart before the horse to think it will change retail." That assumes, of course, that Bezos can use the power of Amazon’s massive sales channel to move enough phones to make the whole project worthwhile, instead of simply offering Firefly as a download for every other smartphone on the planet. In a world of Apples and Samsungs, skepticism runs deep. "It's cart before the horse to think it will change retail. The phone needs to gain adoption first," says Mulpuru. "I don't think the phone is exciting enough to attract early adopters and not priced low enough to get the late adopters either." Mom and pop shops will be hoping she's right.